10 reasons why you should invest in off plan property

The UK needs more houses. It also needs to upgrade existing housing stock. This means that there is a continual need for new homes to be built. That means there are continual opportunities for investors to buy off-plan property. Here, Pure Investor share some of the key reasons why property investors should look seriously at this option.

Lower price

Buying off-plan property often comes with a lower price tag compared to buying a completed property (on a like-for-like basis). This is because developers offer discounts and incentives to encourage buyers to purchase their property before completion.

There are two reasons why it’s in the builder’s interest to do this. Probably the most obvious one is that it helps their cash flow. At a minimum, offering discounts to off-plan purchasers leave the builder no worse off than paying interest on a loan. When interest rates are high, selling to off-plan purchasers can be far more attractive for builders.

Secondly, it gets the sales ball rolling. Once some properties are sold, builders can advertise that there has already been serious interest in the development. This can bring in new buyers.

Safety for your investment capital

Technically, buying an off-plan property is riskier than buying a completed property. In the UK, however, the risk is very low. If you do proper due diligence before signing up, it’s negligible. To put this in context, the COVID19 pandemic stalled homebuilding but it quickly recovered. Some projects were delayed but they were completed.

Hopefully, nothing like COVID19 will happen any time soon. That means any delays are likely to be the result of particularly adverse weather and/or extreme supply-side hold-ups. With that said, even these are unlikely. Builders have always factored in the weather when calculating project times. They now also factor in potential delays in receiving supplies.

This means that buying off-plan property actually helps to keep your investment capital safe. The fact that you get a discount means that property prices can drop without you losing money. If they stay as they are, you gain. If they increase (or when they increase), you gain even more.

Potential for improved rental yield

Essentially, the same logic applies to rental yields. The less you pay for a property, the easier it is to achieve good rental yields.

Investors looking for the most friction-free approach to property investments may choose to lower their rent. This would give them the widest pool of prospective tenants. It would also encourage those tenants to stay. Even with a discount, investors could still expect to earn a decent income from their property.

Alternatively, investors could just set the rent at a fair market value. This might make the property slightly less competitive. The extra income could, however, be enough to justify this.

Ease of marketing

Modern tenants generally prefer modern properties. There are several reasons for this. Most of them, however, ultimately hinge on the fact that modern properties are, literally, built with modern lifestyles in mind.

Probably the most obvious example of this is that rooms in modern properties tend to be used for their intended purpose. Rooms in older properties, by contrast, are often used very differently from how the builder intended. This can lead to very peculiar (and awkward) floor layouts.

This means that it’s generally much easier to market new properties than older ones. In essence, it’s much easier for modern renters to picture themselves living in them.

Payment flexibility

Obviously, this depends on the development and on the developer. As a rule of thumb, however, there’s generally at least some level of flexibility in how you pay for an off-plan property. For example, you may be able to pay in instalments or get a mortgage. If you need a mortgage, the developer may be able to direct you to a lender active in this market.

A hassle-free purchase process

Buying off-plan property is about as straightforward as any property purchase can be. You and the developer will agree on a price. There is no bidding process and no danger of being gazumped. Once that price is agreed upon, the developer will speed through the paperwork efficiently.

You never have to worry about the seller changing their mind and pulling out. You never have to chase them or their solicitor. You don’t have to worry that conveyancing will throw a spanner in the works. It’s all beautifully simple.

Developer warranties

New homes come with developer warranties. This offers a far higher level of peace of mind than buying an existing property.

Customisation options

It’s far easier to customise a property while it’s still being built than after it’s completed. Developers know this very well. That’s why they generally offer buyers the option to customise their property to their taste.

Built to the most modern of standards

In the context of property investment, probably the most obvious implication of this is that new-build homes are built to the highest standards of energy efficiency. This means that they are usually well above the minimum energy efficiency standards.

Firstly, this gives landlords more breathing room if the government increases the minimum energy efficiency standards. Secondly, energy-efficient homes are very attractive to tenants for obvious reasons. What’s more, the cost-of-living crisis will have highlighted the importance of energy efficiency to people who might not have considered it before.

Another reason why modern building standards are relevant to property investors is that they generally emphasise accessibility. Older properties by contrast often have serious accessibility issues.

Accessibility is very relevant even to younger tenants. Firstly, even younger people can have mobility issues, if only temporarily. Secondly, tenants may wish to invite guests who have mobility issues.

Diversify your investment portfolio

If you already own existing property, branching out into off-plan property can be a convenient way to diversify your investment portfolio. If you’re still in the process of building an investment portfolio, then using off-plan property can be a very cost-effective way for you to do it.

This means that off-plan property can be a relatively straightforward route into property investment, especially for investors who have limited funds.